James A. and Joan H. Soholt - Page 13




                                       - 12 -                                         
          deduct 18 percent of certain energy expenses6 petitioners                   
          incurred during 2003.                                                       
               Notwithstanding that 18 percent of petitioners’ home was               
          used as Mr. Soholt’s principal place of business, we cannot                 
          accept certain documentation petitioners introduced that appear             
          to be expenses for remodeling their kitchen.  We must disregard             
          these kitchen remodeling costs because the kitchen was not part             
          of the home used exclusively for Mr. Soholt’s business.                     
          Petitioners are therefore entitled to deduct only 18 percent of             
          the energy expenses, which equals $467.7                                    
          Internet Access Expenses                                                    
               Petitioners claimed $317 for Internet access expenses during           
          2003.  We have previously characterized Internet expenses as                
          utility expenses.  Verma v. Commissioner, T.C. Memo. 2001-132.              
          Strict substantiation therefore does not apply, and we may                  
          estimate the business portion of utility expenses under the Cohan           
          rule.  See Pistoresi v. Commissioner, T.C. Memo. 1999-39.                   
               The parties stipulated that petitioners paid $317 for                  
          Compuserve in 2003.  Mrs. Soholt provided credible testimony                


               6The parties stipulated that petitioners paid $1,180.30 to             
          Center Point Energy, $833.84 to Xcel Energy, and $580.09 to the             
          City of Minneapolis Utility Billing Office in 2003, and                     
          petitioners are entitled to deduct 18 percent of these expenses.            
               7We note that the deduction we permit for petitioners’                 
          business use of the home would be subject to the income                     
          limitations of sec. 280A(c)(5).                                             






Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next 

Last modified: November 10, 2007